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While there are many ways to get a high-paying job, the vast majority require some form of higher education — and education costs money. While there are ways to reduce your expenses, such as using savings and applying for scholarships and grants, many Canadians still require student loans to afford tuition. Student loans are accessible, and often the only way some individuals can access higher education. Unfortunately, paying down your student debt in Canada can be tough. 

The good news is that you can pay them down surprisingly quickly if you are diligent and savvy. 

How To Pay Off Your Student Debt In Canada Quickly?

The longer you sit on your student loans, the more interest you accrue. Though it’s usually at a reasonable rate, it does add up. So how do you pay off your student debt quickly? 

Start Paying Your Students Debts In Canada Right Away

It might seem overwhelming, but paying your loans sooner is always better. If you can, begin paying your student debt while you’re still in school or immediately after. The more you wait, the more your interest will accrue. By paying earlier on, more of your payments will go toward the principal.

Government Student Debt In Canada

With government loans, you would typically get a grace period of six months without payments, though interest would accrue. However, the government recently announced a no-interest student loan model starting April 1, 2023. You can take advantage of this by making as many payments as possible during this time. All of your payments will go to the principal amount. You’d be surprised how quickly that adds up. 

Private Student Debt In Canada

If you opted for student loans through a private lender, interest will usually begin to accrue during your education. With this option, you’ll need to ensure you make the payments each month or risk defaulting. 

Consolidate Your Student Debt In Canada

If you’ve applied for multiple student loans from private lenders or if you have multiple types of debts, consider consolidating your debt. Instead of juggling multiple payments, consolidating your loans will allow you to simplify your payments. 

Moreover, if you qualify for a lower rate than the ones you combined, it can help you save on interest and even lower your monthly payments.  However, you generally require good credit to qualify for one with low interest.

If you keep your payment amount the same as it was prior to consolidation, more of your payment will go to the principal. This can speed up the process of paying off the debt. Be sure to read the consolidation agreement carefully, though. There could be fees associated with extra payments, so make sure you plan ahead. 

Budget And Cut Spending

Regardless of the source of your debt and income, you need a budget. It lends a clear picture of where your money goes and can highlight ways to save. Even small tweaks like buying off-brand cereal or streamlining your subscription services can give you a few extra dollars. When it comes to paying off loans, every penny counts. If you’re struggling with budgeting, there are apps that round up every purchase to the nearest dollar and stash the extra in a savings account. You can use this extra money to pay off your loans more efficiently

Switch From Monthly To Biweekly Payments

It might seem small, but if you shift your payments from once a month to once every two weeks, the result is an extra payment every year. The change will likely go unnoticed, especially if your income is structured on a biweekly schedule. Without impacting your financial flow, this small step can dramatically increase the speed at which you pay. 

Make Extra Payments On Your Student Debt In Canada

The good news about student loans, whether through the government or through a private lender, is that they enable penalty-free extra payments. You can tack on an extra payment, however small, whenever you are able. This way, if you get a raise or earn an extra commission, you can supplement your regular payment schedule. 

Keep in mind that the terms and conditions of private loans are different from federal or provincial arrangements. The profit-based structure of private lenders typically bars you from making extra payments without penalty. Check the terms of your specific contract or call the company holding the debt to find out if extra payments are possible.

Use Extra Money/Unclaimed Money/Tax Refunds To Pay Off Student Debt

If you happen upon some extra money — whether from earnings from a summer job, a monetary gift, or from your tax refund — consider putting it toward paying down your student loan debt. Although you may be tempted to spend that lump sum of money on something fun, like a trip with friends, a new car, or the latest iPhone, you’d be better off using it to get rid of your student debt. 

Take Advantage Of Student Discounts And Tax Credits

There are a handful of tax deductions and credits available to eligible students that can help keep costs down and save money to put toward paying down debt. Here are a few to consider:

Tuition, Education, and Textbook Tax Credit 

Before 2017, students were eligible to claim education and textbook credits. Unfortunately, these tax credits ended in 2017. That said, you may still be eligible to claim a provincial or territorial amount. In addition, any unused tax credits for the year may be carried over on future tax claims.

You may be eligible to claim your tuition fees if your courses were taken at a qualifying post-secondary education institution. Your school must provide you with a specific tax form that details the amount of eligible tuition you’ve paid in a calendar year.

Moving Expenses and Transportation

If you’re attending school away from home to study full-time, the costs associated with moving may be claimed on your tax return. 

Several moving costs can be claimed, including the following:

  • Travel expenses  
  • Packing materials (ie. boxes, etc)
  • Moving company fees
  • Utility fees
  • Meals and accommodation during the moving process (for no more than 15 days)
  • Transportation costs to go to school (ie. bus tickets, gas, etc)

Make sure you save your receipts to help when claiming these expenses on your tax return. 

Scholarships, Bursaries, and Grants

There are thousands of scholarships and grants available in Canada. Look into what’s available to you so you can offset the cost of tuition. 

If you receive a scholarship or bursary for your studies, you won’t have to declare it as income when you file your taxes. That means you won’t have to pay taxes on this money. Further, any income received from a student loan is also not taxable. 

However, research grants must be declared as income on your taxes, but you may deduct certain related expenses, such as travel costs, fees associated with equipment and renting out a workspace, or hiring an assistant.

What If I Can’t Afford My Student Loan Payments? 

As the last couple of years have showcased, the economy can be unpredictable. To account for this, the federal and provincial governments offer loan repayment assistance. Based on your financial situation and other household factors, you can access quite a bit of help. 

Government Student Loans

For those unable to pay back either federal or provincial student loans, there is a Repayment Assistance Program. To qualify for the RAP, you complete a form detailing your financial limitations. This can be done either online or via the mail. The RAP form inquires as to how many dependents are in your household, how you are making money, and how much you make. If you are without income, it asks how you are supporting yourself.

Your details are entered into a calculator that determines your minimum debt payment. Most often, it results in reduced payments for a six-month period. In some cases, you can defer payments for six months with the government footing the bill for interest during that period. You’re left with the same principal amount, but the six months’ breathing room gives you a chance to repair your finances.

Private Student Loans

Private lenders are usually less accommodating than government-funded models. Due to the profit requirements of alternative lenders, there is less wiggle room to offer loan forgiveness or deferral. In these situations, it is better to reach out to a third party for assistance. Look for non-profit credit counsellors in your area. Many offer socially distanced, online services where you can confidentially discuss your financial situation. These professionals will give you advice on how to best manage your debt. 

Be sure to research the credit counsellor and ensure that they are both certified and reputable. It’s the fiduciary responsibility of the counsellor to provide good advice, but that’s only a guarantee if there is actual oversight. So long as you find a reliable agency, you can get access to services like loan consolidation to reduce financial strain.  

Final Thoughts 

Student loan debt is completely normal and a well-accepted part of society. When used properly, the loans can help you develop a great career with a good income. Provided you plan ahead and prudently address your loans at every opportunity possible, you can save a lot in interest. By making regular payments and taking advantage of benefits like the interest freeze, you can pay off your student loans faster than you might expect.

Student Loan Debt FAQs

How do government student loans work? 

Upon graduation, graduates get an interest-free period of six months where no payments are required. After this time, monthly payments are expected and taken via automatic withdrawal. Typical amortization periods are over ten years, though you can make extra payments to reduce this time substantially. 

Who qualifies for student loan forgiveness?

Loan forgiveness is a hot topic these days, with the concept of federal student debt forgiveness being used as a campaign issue. This refers to loans on a national level, not necessarily by province. Each jurisdiction has its own methods for loan forgiveness, so the opportunities will vary based on where your loan is held. 

Can student debt in Canada affect my credit?

Your student loan could affect your credit score in a few ways. For starters, your payment history will impact your credit. More specifically, timely payments will help keep your credit score healthy, while missed payments will pull your score down.
Corrina Murdoch avatar on Loans Canada
Corrina Murdoch

Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

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